Prosser Adds 7th Lawyer As Assistant Jumps Ship

Aug. 21, 2008 — In a busy week for Jeffrey Prosser, the former owner and CEO of Innovative Telephone decided to hire an Ohio lawyer once jailed for failing to pay federal taxes, while Prosser's former financial assistant, Eling Joseph, switched sides and now works for the court-appointed trustee handling the erstwhile Prosser corporations.
Meanwhile, the U.S. Department of Agriculture, which once guaranteed a more than $60 million loan to Vitelco, is finally looking into the debt, after ignoring it for years.
Prosser is in Chapter 7 bankruptcy, and Innovative Telephone is in Chapter 11 along with its sister companies Vitelco, Innovative Cable, TV Channel 2 and others.
With six lawyers already working on his case, Prosser has hired Norman A. Abood, a Toledo attorney who practices business law. In bankruptcy cases, debtors cannot hire lawyers without the court's approval, and trustee Stan Springel has objected to the hiring of another lawyer by "an unemployed chapter 7 debtor who claims virtually no assets and no present means of support."
Springel has told the court that Abood was in a federal penitentiary for failing, to quote a Toledo Bar Association document, "to pay his federal income taxes as the taxes became due on April 15 each year for the years 1987, 1988, 1990, 1991, 1993, 1996, 1997, and 1999…."
After Abood's jail time, he was suspended from the practice of law by the Ohio Supreme Court. His license to practice was eventually restored.
U.S. Bankruptcy Court Judge Judith Fitzgerald signed an order Tuesday allowing Abood to join the case, but wrote the following caveat, in pen, on the order: "This order is subject to being vacated [i.e. reversed] for cause shown including but not limited to conflict of interest in representation due to the circumstances… of record this date regarding payments, etc., from or by Dawn Prosser." (The word following "circumstances" is illegible on the court document.)
Joseph has played a cameo role thus far in the case, now in its third year. Earlier, Springel successfully moved to cancel a lease on a Florida apartment for her once funded by Innovative Communication Corporation. He said she was no longer living there.
In Springel's most recent operating report to the court, which delineated millions in expenditures and pages and pages of checks made out by the trustee and his staff, she was noted as receiving on May 15 a check for $4,801.40. It is not known whether this was a one-time payment or a periodic one.
Prosser's lawyers are seeking documents from Springel, including the logs of Prosser's former private Boeing 727 jet, saying that they need them to challenge Joseph's statements about Prosser expenditures because, they say, the logs would prove that Prosser was out of town when some of the alleged payments were ordered. Springel's lawyers say that the trustee no longer has the logs, which were sold with the 727.
In another document, Springel reported a conflict with an arm of the U.S. Department of Agriculture, the Rural Utilities Service, over a hefty loan Prosser had obtained for Vitelco several years ago. The loan, once more than $62 million, was guaranteed by RUS and lent at below-market rates by an obscure part of the U.S. Treasury.
As the Source has reported over the years, interest and a little principal has been paid regularly byVitelco under both the Prosser and Springel regimes.
Springel's report states:
"The RUS has issued a default letter to Vitelco. Despite the fact that Vitelco is current on all payment obligations to the RUS, certain non-payment defaults have been alleged, including Vitelco's failure to provide financial audits for 2006 and 2007, Vitelco's unauthorized 2004 loan to its affiliate, Belize Telecome, Ltd., and alleged distribution violations. As a result of the default letter, Vitelco will not upstream funds to New ICC for payment of administrative expenses. The Trustee is currently in discussions… to have the RUS forbear until the sale of Vitelco is complete. A condition of sale is that the RUS be paid in full."
The "administrative expenses" mentioned by Springel are primarily the costs of the various court-appointed officials, such as the trustees, their lawyers and accountants. Although he did not discuss how these costs would be met in the near future, in the past when a flow of income was not available to meet these costs, the Rural Telephone Finance Cooperative, long Prosser's bankers, lent the needed funds.
To "upstream" is the accountants' term for the transfer of monies from an operating company like Vitelco to its corporate parent or parents.
Some observers have noted an irony in the stance of the RUS. In earlier years, when the loan was in the hands of Prosser, RUS issued no public demands and in fact refused to release any Vitelco financial information to the Source on the grounds that such information must be kept secret for "competitive reasons."
The Source's arguments that Vitelco was a monopoly and that these were public funds fell on deaf ears. Now that the loan is no longer controlled by a controversial entrepreneur but is in the hands of a trustee appointed by the U.S. court system, the RUS has decided it wants more information.
In another development, James P. Carroll, the chapter 7 trustee who works on Prosser's personal holdings, has filed six more suits seeking the recovery of more than $1.1 million from organizations that were paid by Prosser during the bankruptcy proceedings when, according to Carroll, he had no right to make such payments without court permission. The "disgorgement" suits — the forced giving up of monies obtained by illegal or unethical acts — are aimed at Bergdorf Goodman, the high-end Manhattan retailer, American Insurance Group for insurance of various kinds, and four mainland construction firms.
Carroll filed a similar suit in July against American Express for nearly $1 million dollars in credit card bills paid by Prosser under identical circumstances.
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